Steel & Tube Holdings Limited · NZX:STU
Steel & Tube — Investor Presentation (May 2022)
81 slides from Steel & Tube's investor presentation, May 16, 2022
Slide 1: Investor Presentation
Investor Presentation 16 May 2022
Slide 2: Welcome
Welcome Susan Paterson Chair 2
Slide 3: Agenda
Agenda Strategy and Business Functions Sustainability Finance Update • Company • Distribution • Customer Value • Our approach Overview Proposition • Rollforming • Dr Troy Coyle, Financial Update • Supply Chain HERA • • Reinforcing Discussion • People & Culture • Discussion • Discussion • • Site Visi
Slide 4: Company Update
Company Update Mark Malpass Chief Executive Officer 4
Slide 5: Steel & Tube
Steel & Tube • One of New Zealand’s leading providers of steel solutions • A proud New Zealand company, with over 68 years of trading history • We offer New Zealand’s most comprehensive range of steel products, services and solutions • Our stable of best-in-class businesses are some of this country’
Slide 6: Our purpose
Our purpose To make life easier for our customers needing steel solutions • Providing a one-stop-shop for the most essential steel products – from foundation to roof and everywhere in between • Doing everything we can to make it easy for our customers to do business with us • Always looking for ways
Slide 7: Our business divisions
Our business divisions Products sourced from preferred Products processed before sale, typically Infrastructure Distribution steel mills and distributed through on a contract or project basis, including our national network onsite installation services Steel Piping Systems Chain & Rigging Roofing Co
Slide 8: Primary product and service offering by participants
Primary product and service offering by participants Stainless steel Engineering distribution Reinforcing processing processing Fasteners Roofing Plate Steel steel steel Wire Coil Steel & Tube 5 5 5 5 5 5 5 5 5 Fletcher Steel j 5 5 5 5 5 5 5 Vulcan 5 5 5 5 5 United Industries 5
Slide 9: Our journey
Our journey Late-2017 embarked on an extensive company- wide reset to drive sustainable earnings Moving Forward improvement and rebuild shareholder value. Steel & Tube leadership Foundation now built and moving forward. in the sector and the preferred choice for steel products and solutions across t
Slide 10: Structural changes delivering value (1H18-1H22)
Structural changes delivering value (1H18-1H22) Optimised national network • Sites reduced from 50 to 26 with regional strength • $2.5m reduction in annual lease costs Enhanced customer value • Group-wide Customer Excellence Centre established, e-commerce, proposition omnichannel platform, CRM and c
Slide 11: Focusing on continual improvement
Focusing on continual improvement Employee Safety Measure Employee Engagement Satisfaction Score 7.8/10 TRIFR 1.13 Well below industry standards 15 40 35 29 30 eNPS SCORE 10 TRIFR 19 20 13 15 5 10 5 0 0 FY16 FY17 FY18 FY19 FY20 FY21 Apr 22 July 20 Nov 20 Mar 21 July 21 Dec 21 Apr 22 Customer satisfa
Slide 12: COVID-19 management
COVID-19 management Agile management through COVID-19 focussed on people supporting customers Weekly Revenue - FY22 Vs FY21 • Leadership position on 18 vaccine incentives for staff 16 Lockdown Auckland AL3 NZ moved to "red" • Vaccine protocols for 14 customers and suppliers 12 visiting sites Weekly
Slide 13: Strongly positioned to benefit from market conditions
Strongly positioned to benefit from market conditions Steel & Tube Value Headwinds Tailwinds • Positive economic activity • Global COVID-19 • Significant rebuilding of driving increased demand environment investment in infrastructure for steel across a range of sectors • Congested Global supply • Ex
Slide 14: Positive economic activity driving demand for steel
Positive economic activity driving demand for steel Increased demand across a range of sectors; most trends expected to continue medium term Performance of Manufacturing Share of FY22 (10 months) Sales Residential Consents 50 8 Index (PMI) No. Consents (000’s) 45 60 SQM (000s) 7 Infrastructure 40 14
Slide 15: Results April YTD - 10 months financial performance
Results April YTD - 10 months financial performance Record revenue and earnings driven by strong sector demand, customer service, operational performance and disciplined supply chain management Revenue Volume EBITDA EBIT NPAT $479.3m 136,831t $53.6m $37.9m $24.1m +24.6% +7.8% +81.6% +156.7% +226.7%
Slide 16: Strong results driven by delivery on strategic initiatives
Strong results driven by delivery on strategic initiatives Benefits of strategic initiatives becoming clear • Volumes and revenues – rebuilt post COVID-19 and targeted growth product categories • Margin improvements – driven by product margins and labour / freight efficiencies • Improved customer se
Slide 17: Strategic focus
Strategic focus Growth focused on strengthening the core and building on higher value segments Build on Foundation Product & Service Growth “Strengthen the Core” “Diversify Locally” • Continue to build best-in-class customer • Improving resilience of earnings through experience economic cycles • Lev
Slide 18: Product development and innovation
Product Expand plate processing capability and offer • Attractive value-added products development • Growing market sector and innovation • Existing footprint with significant opportunity to expand Identified growth • Replacement of obsolete equipment with large, high opportunities in high capacity
Slide 19: FY22 Guidance
FY22 Guidance Expect FY22 Normalised EBIT no less than $45m and Normalised EBITDA of no less than $64m Market conditions expected to remain Significant turnaround complete, benefits positive locked in, focus strengthening and growth • Commercial consents building and • Capturing operational leverage
Slide 20: Our Strengths
Our Strengths • Strong governance and sustainability focus • Leading the way in the sector with digital • Established leadership positions in multiple platforms providing efficient access for categories of the steel market customers • Diversity across multiple sectors in the steel • Trusted customer
Slide 21: Group Financial Update
Group Financial Update Richard Smyth Chief Financial Officer 21
Slide 22: Group Financial Summary (10 months)
Group Financial Summary (10 months) • Strong volume and revenue uplift FY22 FY21 ─ Revenue up 24.6% $m (10 months (10 months Var% Actuals) Actuals) ─ Volumes up 7.8% Revenue 479.3 384.6 24.6% • Gross Margin continues to improve EBITDA 53.6 29.5 81.6% • Structural reduction in operating Normalise
Slide 23: Group Financial Performance
Group Financial Performance • 2H20 was significantly 500 90 impacted by COVID-19 Gross Margin 70 400 • Four consecutive half year Re venue 50 periods of strong growth 300 Normalised $m E BITDA 30 $m • Earnings momentum Normalised 200 E BIT supported by business 10 improvements and solid 100 -10 acti
Slide 24: Revenue (10 months)
Revenue (10 months) Strong trading momentum Volume 136.8Ktonnes, up 10Kt Sales & Volume (10 months) or 7.8% on pcp 150 500 Increasing customer demand for comprehensive range of products 400 Tonnage (000’s) 120 Revenue $479.3m, up $94.7m 300 $m or 24.6% on pcp 200 Continuing sales momentum, 90 despit
Slide 25: Margin (10 months)
Margin (10 months) Focus on gross margin $/tonne Year on Year (10 months) Margin improvement Improvement • Data driven pricing decisions resulting in 25% 23.0% 900 effective price management in a dynamic 20.8% environment 20% 600 • Product mix focused on growing market 15% share in attractive sector
Slide 26: Normalised operating expenses (10 months)
Nomalised operating expenses (10 months) Ongoing relentless focus on operating expenditure Significant structural changes delivering long term benefit completed Normalised Opex (10 months) 80.0 25.0% • Low fixed cost base has been maintained • Operational costs as a percentage of sales continues 60.
Slide 27: Normalised operating expenses summary
Normalised operating expenses summary • Normalised Opex has continued Normalised Opex to decline as a percentage of 50.0 25.0% sales (2H20 blip due to COVID- 19 lockdown sales impact) 20.0% • Dollar increases have been 15.0% limited to inflation, depreciation 25.0 $m and a small number of 10.0% addi
Slide 28: Inventory
Inventory • Investment into high demand, $10.4 $8.6 $4.3 $192.4 $16.2 high margin SKUs $152.9 • Increase in Inventory a result of: $188.1 $m ─ Higher prices ─ Slightly longer supply chain resulting in an increase in SOH December 2021 Cost Price Escalation Local Supply Chain International Supply Chai
Slide 29: Cashflow
Cashflow • Strong cash inflows reflecting the increased revenues • Significant investment in inventory which has increased $40m in the last four months • Dividends paid during FY22 • Expect to start paying Company Income Tax from FY23 • Extension of existing revolving cash advance facility from $50m
Slide 30: Governance
Governance • Fully established Board and Sub-Committee Structure: ─ Audit and Risk Committee ─ Governance and Remuneration Committee ─ Quality, Health, Safety and Environment Committee • Director Skills Matrix • Code of Ethical Behaviour • Board and Team Diversity • Change in External Auditors 30
Slide 31: Panel discussion
Panel discussion 31
Slide 32: Distribution
Distribution Marc Hainen General Manager Distribution 32
Slide 33: Our business divisions
Our business divisions Products sourced from preferred Products processed before sale, typically Infrastructure Distribution steel mills and distributed through on a contract or project basis, including our national network onsite installation services Steel Piping Systems Chain & Rigging Roofing Co
Slide 34: Distribution Performance
Distribution 400 Sales & Volume (10 months) 100 Performance 350 95 300 Tonnage (000’s) 90 250 200 85 $m • Revenue +37.3% 150 80 100 • GM $ - pricing & improved 50 75 product mix + 63.3% 0 70 FY21 FY22 • Tonnes growth – little Sales Tonnage COVID-19 effect + 11.2% • Benefits on prior cost EBIT(10 mon
Slide 35: Procurement and Shipping
Procurement Asia Merchant Bar Price (excl. Shipping) US$/Tonne MEPS International and Shipping 1600 1,600 1400 1,400 • Mill capacity constraints and 1200 1,200 US$ NZ$ 1000 1,000 allocations 800 800 • Steady rise in steel costs (USD) 600 600 • Recent weakening in NZ USD US$/Tonne NZ$/Tonne cross rat
Slide 36: Procurement and Shipping
Procurement Vessel Global Schedule Reliability Sea-Intelligence, GLP Report and Shipping 80% 70% Pe rfomance to Schedule 60% 50% • Shipping reliability worsens 40% 2020 2021 and days delayed increased 30% 2022 20% • Container capacity constraints 10% 0% • Shipping cost increases (USD) Jan Feb Mar Ap
Slide 37: Margin Management
Margin Management • Disciplined pricing systems, digital analytics and Gross Margin $ per Tonne (10 months) reporting - optimising margin $ achievement 1,000 • Active price management in a dynamic 900 environment 800 ─ Margin $ per tonne +46.8% 700 600 • Shift in focus to high value customers/market
Slide 38: Customer Service Performance
Customer Service Performance • Improving DIFOT 98.2% Abandon Rate • Customer Excellence centre performance - strong regional alignment Target • Increased sales & service focus on high value customer segments Average Wait Time • Webshop growth - 24 hours access, lower cost to serve Target • Electroni
Slide 39: Growth Trajectory
Growth Trajectory • Investment in high value, high returning segments • New plate processing equipment currently commissioning • Organic growth in seismic systems (Zipclip) and roofing screws (Rooffast) launched, acquired Fasteners NZ • Share of wallet focus on high value customer segment supported
Slide 40: Rollforming
Rollforming Mohammed Afroz General Manager Rollforming 40
Slide 41: Our business divisions
Our business divisions Products sourced from preferred Products processed before sale, typically Infrastructure Distribution steel mills and distributed through on a contract or project basis, including our national network onsite installation services Steel Piping Systems Chain & Rigging Roofing Co
Slide 42: Roofing
Roofing Business Context Business Performance • Largest revenue contributor for Rollforming • 6% Revenue growth in roofing with a at 60% buoyant Residential sector • Six branches offering 15 profiles covering • Four year supply agreement with Kāinga residential and commercial sectors Ora supplying 1
Slide 43: Sheeting and Coil Processing
Sheeting and Coil Processing • Servicing manufacturers and sheet 20% metal fabricators 15% • Same day or 24hr delivery service for 10% standard and cut to length sheets Volume % Growth 5% • Increased volume in coil processing in both residential and commercial sectors 0% 1H20 2H20 1H21 2H21 1H22 2H2
Slide 44: Purlins
Purlins • Significant growth in the last 10 months 70% • Volume up by 62% with Revenue uplift 60% of 80% 50% • Smart procurement planning for stock availability % Volume Growth 40% • Cross group customer focus is increasing 30% share of wallet 20% • Strong secured works pipeline 10% • Recently imple
Slide 45: ComFlor/CFDL
ComFlor/CFDL • Exclusive licence to ComFlor range of products • Most specified metal decking system • Sustainable solution using less concrete per square meter, meeting fire and acoustic standards • End to end service - technical support to installation • Projects installed by CFDL, market leaders i
Slide 46: Steel Framing
Steel Framing • Opportunity identified through mass timber shortage mainly in the residential sector • Steel & Tube supplies slit coil for steel framed houses to Group Home Builders and other fabricators • As Rollforming specialist there are synergies to service the residential sector with fabricate
Slide 47: Reinforcing & Wire
Reinforcing & Wire Peter Ensor General Manager Reinforcing 47
Slide 48: Our business divisions
Our business divisions Products sourced from preferred Products processed before sale, typically Infrastructure Distribution steel mills and distributed through on a contract or project basis, including our national network onsite installation services Steel Piping Systems Chain & Rigging Roofing Co
Slide 49: Introduction
Introduction • Product quality and traceability • Strong focus on safety through manufacturing and construction • Customer synergies across the group 49
Slide 50: Performance
Performance • Mitigating and recovering Sales by Sector FY21-22 from the impacts of COVID-19 Residential • Managing rapidly escalating Construction 12% pricing in a contracting environment • Sector growth outlook strong and solid order book Infrastructure • Carefully managing 45% contracting risk, e
Slide 51: Strengths
Strengths • Leveraging methodology and manufacturing capability • Customer early engagement a differentiator • Digital solutions are now changing the game • Continued investments in manufacturing plant • Highly engaged and experienced workforce • Local and Central Government customers’ client 51
Slide 52: Panel discussion
Panel discussion 52
Slide 53: Customer Value Proposition
Customer Value Proposition Mike Hendry Chief Digital Officer 53
Slide 54: Customer Value Proposition
Customer Value Proposition • Provide the broadest range of steel solutions in the NZ market • Have knowledgeable and skilled people to help you with your steel needs • Be easy to do business with • Deliver value • Highly customer focused • Innovative • Lead the industry in safety and quality • Stron
Slide 55: Our client base is highly diverse with a broad set of requirements we address
Our client base is highly Most diverse with a broad set of Valuable Customers in requirements we address via Their Segments careful customer targeting High Small Potential & and Medium Growth Enterprises Orientated Construction Manufacturing Rural Some are Resellers Exclusively & Project Merchants W
Slide 56: New Digital and Sales and Service Capability
New Digital and Sales and Service Capability • Segmentation Analytics • Pricing • S&OP E-Commerce • Webshop • EDI CX • CRM 56
Slide 57: Analytics
Analytics For illustrative purposes only 57
Slide 58: E-Commerce / EDI
E-Commerce E D I Direct customer integration for our largest customers • High Growth “Sticky” • Catalogues 7x24 channel • Pricing • Proven convenience • Orders and Invoices generates excellent NPS • Test Certificates • Exclusive or “Mix and Match” Customer Use 58
Slide 59: Customer Based Performance Measurement
Customer Based Performance Measurement Revenue, The measure of how NPS The measure as to how well our Key Outcomes Margin and we are performing $ % $ customer feels we are performing. Average Share in the market Would they recommend us. How are we Customer How our performance for this customer ranks
Slide 60: Supply Chain
Supply Chain Mark Baker General Manager Group Supply Chain & Distribution Centres 60
Slide 61: Group Supply Chain and Distribution Centres
Group Supply Chain and Distribution Centres • Network Backbone and Distribution Centres • Sales and Operations Planning / Integrated Business Planning • Availability and DIFOT • Inventory profile and performance 61
Slide 62: Network Backbone and Distribution Centres
Network Backbone and Distribution Centres Primary steel DC • Backbone network across the Group – Primary stainless DC Primary fastenings DC centred strongly in Auckland / Golden Coil Processing Triangle Plate Processing • Distribution Centre / child branch model Roofing optimises inventory, service
Slide 63: Sales and Operations Planning
Sales and Operations Planning • Integrated at a Group level • Anchored to our value FORECAST proposition and service promise DE MAND NE TWORK INVENTORY CAPACITY • Balances inventory investment LE VELS with earnings SEGMENTS CATEGORIES • Key focus area for capability PU RCHASING SERVICE DIRECT develo
Slide 64: Availability and DIFOT
Availability and DIFOT DIFOT • Maintaining high availability on key / critical lines to target segments is core to our 98%+ proposition Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 • Consistency of performance is critical – some out of stocks inevitable Availability • Availa
Slide 65: Inventory Profile and Performance
Inventory Profile and Performance $8.6 $4.3 $192.4 • Cost price inflation and supply $16.2 $10.4 $152.9 chain disruption drives inventory value $188.1 $m SOH December Cost Price Local Supply International Additional to SOH April 2022 2021 Escalation Chain Supply Chain support sales • Cover at unit a
Slide 66: People & Culture
People & Culture Anna Morris General Manager People & Culture 66
Slide 67: Our People
Our People Main cities through to small regions 840 FTEs excluding vacancies Average 6.4 years service 500 Operational Team Members Average age 42 32 Ethnicities 27% females 67
Slide 68: Labour Model Efficiency
Labour Model Efficiency • Changed Labour model FTE Information $70,000 1,200 • Significant FTE reduction $60,000 1,000 • Capacity for higher outputs $50,000 Revenue per FTE ($) 800 Headcount $40,000 600 $30,000 400 $20,000 200 $10,000 $- 0 1H20 2H20 1H21 2H21 1H22 2H22 Av Rev per Revenue per FTE FTE
Slide 69: COVID-19 Response
COVID-19 Response Committed to our People • Frequent Communication • Vaccines Incentives • Company-wide consultation on approach to vaccinations • Mandatory Vaccinations • Care Packages • Frontline Recognition Payments • Paid Isolation leave • Hardship support • Booster Programme • Supply of RATs to
Slide 70: Employee Engagement
Employee Engagement • 35 ENPS Employee Engagement 40 Satisfaction Score 7.8/10 • Committed to continuous 35 improvement 35 29 30 eNPS SCORE 25 19 20 15 15 13 10 5 5 0 July 20 Nov 20 Mar 21 July 21 Dec 21 Apr 22 70
Slide 71: Competing for Talent
Competing for Talent Retention is Key • Record levels of internal movements • Employee Engagement actions • Reward for Performance programmes Recruitment for growth • Relationships with alternative sourcing providers • Internal referrals 71
Slide 72: Focus Areas
Focus Areas Gearing Team around Customer Experience • Career path • Sales and Customer Service competency • Expansion of productivity based incentives 72
Slide 73: Sustainability
Sustainability • Work experience/MBIE partnership programmes • English and numeric literacy • Back to school funds • Budgeting and financial wellbeing programmes • Mates in Construction partnership 73
Slide 74: Panel discussion
Panel discussion 74
Slide 75: Sustainability
Sustainability Trent Brash Group Sustainability Manager 75
Slide 76: Sustainable Steel
Sustainable Steel Steel facilitates the circular economy: • Infinitely recyclable • Reduced construction waste • Durable • Thermal capabilities • Non-toxic and inert 76
Slide 77: ESG Strategy
ESG Strategy Steel & Tube are developing its ESG strategy: • MBIE feedback • XRB consultations • Preparation for NZ CS 1: Climate-related Disclosures • Sustainability systems • Materiality assessment 77
Slide 78: Sustainability at Steel & Tube
Sustainability at Steel & Tube Carbon abatement opportunities • Reduction in energy use • LED lighting • Waste reduction • Freight efficiency • Solar 78
Slide 79: Sustainability
Sustainability Dr Troy Coyle Chief Executive Officer, HERA 79
Slide 80: Non-GAAP Financial
Non-GAAP Financial RECONCILIATION OF REPORTED NORMALISED EBIT EBITDA (10 Months) EBIT (10 months) Period ended 30 April Restated Restated $000s FY22 FY21 FY22 FY21 Reported 53,595 29,521 37,875 14,752 Holiday Pay provision release (854) - (854) - IFRS16 Impairment Reversal (374) (777) (374) (777) Ga
Slide 81: Disclaimer
Disclaimer This presentation has been prepared by Steel & Tube Limited (“STU”). the financial condition, results of operations and business, and business The information in this presentation is of a general nature only. It is not a strategy of STU. Information about the future, by its nature, involv
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